oppn parties Educational Loans: Adding to NPA Burden of PSU Banks

News Snippets

  • MS Dhoni decides to take a two-month break, will skip West Indies tour but will not retire
  • Phagu Chauhan is the new Governor of Bihar while Ramesh Bais has been appointed as that of Tripura
  • Governors: Anandiben Patel shifted from Madhya Pradesh to Uttar Pradesh and Lalji Tandon from Bihar to Madhya Pradesh
  • Naga talks interlocutor RN Ravi appointed as Governor of Nagaland
  • Noted lawyer Jagdeep Dhankhar appointed as new Governor of West Bengal
  • 84 NDRF teams have been despatched to 23 states to tackle the flood situation
  • Three persons lynched in Bihar after being accused of cattle theft
  • Delhi police seize a consignment of 1500 kgs of heroin and busts a cartel of Afghanistan-Pakistan narcotics dealers with links to the Taliban
  • Supreme Court gives 9 more months to complete the Babri Masjid demolition case trial
  • Priyanka Gandhi not allowed to meet the families of the dead in the Sonabhadra firing, arrested
  • ICC inducts Sachin Tendulkar in [email protected]@@s Hall of Fame
  • Stock markets bleed for the second day. Sensex crashes 560 points
  • S Jaishankar, Minister of External Affairs, says Pakistan should release and repatriate Kulbhushan Jadhav immediately
  • Karnataka Governor Vajubhai Vala asks the Speaker to hold the trust vote latest by 1.30 pm today
  • The Government sends a list of 24 questions to mobile app company that runs video app TikTok seeking answers for anti-national and obscene content carried on the platform
Former Delhi CM and senior Congress leader Sheila Dikshit dies following a cardiac arrest. She was 81
oppn parties
Educational Loans: Adding to NPA Burden of PSU Banks

By Debasmita Mitra

About the Author

Sunil Garodia Pursuing Masters in Economics at Calcutta University. Aspiring economist. Budding writer.
Of late, education loans are becoming a headache for the public sector banks. Loans which remain overdue for 90 days or more are technically termed as non-performing asset (NPA). According to Prime Minister Narendra Modi’s ‘Skill India’ project, making higher education affordable is a key objective. However the growth in education loan has been steadily declining with the number of loan disbursements seeing a 60% fall since 2009. This is because more than 10% of such loans have been categorized as NPA’s. Also, in this domain, it has been observed that the private banks, which are actively involved in personal segment loans such as home loan, car loan, gold loans, are nowhere to be seen. The NPA level is on the higher side in case of education loan because the advances are collateral free up to a certain level.

Have you got your deal at Flipkart today. Get in here and now

Another primary reason behind the poor repayment of educational loans is the poor scope of employment and increased scale of finance for the technical and professional courses. The repayment of education loan is supposed to come from the future income of the student once he gets a job. However, with rising cost of education there is a serious anomaly between the monthly income of the student and his/her commitment to repay.

Nevertheless, the popularity of education loan is growing by the day, the reason being increasing fee structure of several institutions. Parents are unable to finance the same and approach banks for loans. But as stated earlier, disbursements are going down. The concept of education loan first came into existence in 1995 when it was introduced by the SBI. Now, almost all PSU banks offer education loans. Due to increasing Non Performing Assets (NPA) on educational loans, the Indian Bankers Association (IBA) has revised the educational loan scheme, framed in 2001. The banks have been advised to be prudent and cautious while granting loans. Also, RBI governor Raghuram Rajan recently warned students and parents against taking huge education loans to study in institutions which offer ‘useless degrees’ with which they cannot get good jobs and hence find it difficult to repay the loan.

Banks and other institutions lending in this sector have developed a common strategy to reduce loan default by getting footprint of every student who takes loan created in the credit bureaus’ database. Hence, whenever an individual applies for a new loan, the credit score will reflect the history from the education loan. With time, this will help to reduce NPA’s. But banks should ensure that genuine students who get admission in good institutions are not deprived of higher education for want of finance.

Flipkart offers latest fashion at amazing discounts. Get it here